How to Run a Credit Reporting Agency in China

Agencies, Authorities, Bureaus, Compliances, Governance, Read, Registrations, Regulations

The People’s Bank of China issued a Draft for comments on “Measures for the Administration of Credit Investigation Services“. It is intended to regulate the credit investigation business and related activities, and promote the healthy development of the credit investigation industry. This is formulated in accordance with the “Civil Code of the People’s Republic of China”, “The People’s Bank of China Law of the People’s Republic of China”, “Regulations on the Administration of Credit Investigation Industry” and other laws and regulations.

Who is affected?

These Measures shall apply to individuals, enterprises, institutions and other organizations that carry out credit investigation services and related activities within the territory of the People’s Republic of China, but these Measures are also applicable to the credit investigation business and related activities of residents of the People’s Republic of China (natural and legal persons) outside the People’s Republic of China.

The term “credit information” refers to various types of information used to determine the credit status of individuals and enterprises by providing services for financial and economic activities. Personal and corporate identity, address, transportation, communication, debt, property, payment, consumption, production and operation, fulfillment of legal obligations and other information, as well as analysis and evaluation of the credit status of individuals and companies based on the foregoing information information are all considered to be “credit information”.

When engaging in credit investigation business and related activities, the lawful rights and interests of information subjects shall be protected in accordance with the law, information security shall be protected, and the leakage and abuse of credit information shall be prevented. Engaging in credit investigation business and related activities shall follow the principles of independence, objectivity, and impartiality, and shall not make discriminatory arrangements that violate social public order and good customs, and shall not provide exclusive services with the help of an advantageous position.

The collection of credit information by credit reporting agencies in China shall follow the principle of “minimum and necessary” and shall not collect excessively.

Credit reporting agencies shall not collect credit information in the following ways:

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When collecting credit information, credit reporting agencies shall review the business legitimacy, information sources, information quality, information security, and authorization of information subjects of the information providers to ensure the legality, accuracy and sustainability of the collection of credit information.

Credit reporting agencies in China shall clarify their respective rights and obligations with information providers in terms of data correction, objection handling, and information security. The People’s Bank of China expects credit reporting agencies operating personal credit reporting services to formulate plans for collecting personal credit information, and report to the People’s Bank of China on matters such as the collected data items, the correlation with credit, and the protection of information subjects’ rights and interests.

The collection of personal credit information by a credit reporting agency shall obtain the consent of the information subject, and clearly inform the information subject of the purpose, source and scope of the collection of credit information, as well as the possible adverse consequences of not agreeing to the collection of information. Where a credit reporting agency obtains personal consent through an information provider, the information provider shall clearly inform the information subject of the name of the credit reporting agency. When collecting non-public corporate credit information, credit reporting agencies shall adopt appropriate methods to obtain the consent of the enterprise. The collection of credit information related to the performance of duties by corporate directors, supervisors, and senior executives by credit reporting agencies shall not be regarded as personal credit information.

Credit reporting agencies shall follow the principle of objectivity in sorting, storing, and processing credit information and shall not tamper with the original data. If a credit reporting agency finds information errors in the process of sorting, storing, and processing credit information, if the information provider reports an error, it shall promptly notify the information provider to correct it; if it is an internal processing error, it shall promptly correct it, and improve the internal processing flow.

5 Years Retention Period

The retention period of bad personal information collected by credit reporting agencies in China shall be 5 years from the date of termination of bad behavior or incident. When bad credit information expires, the credit reporting agency should delete it. If it is used as sample data, it should be de-identified and moved to a non-production database for storage to ensure that personal credit information is not directly or indirectly identified. The People’s Bank of China encourages redit reporting agencies to separate personal identification information from other credit information, and implement physical isolation.

Credit reporting agencies shall take appropriate measures to conduct necessary review of the identity, business qualifications, and purpose of use of information users. They shall conduct necessary review of the network and system security and compliance management measures of information users who access the credit reporting system through the Internet, monitor the inquiries, discover violations, and stop services in a timely manner. Credit reporting agencies shall conduct necessary review of information users to ensure that information users obtain the consent of the information subject when inquiring about personal information and use it for the agreed purpose. The use of credit information provided by credit reporting agencies by information users shall be used for lawful and legitimate purposes and shall not be abused.

Information users shall use personal credit information for clear and specific purposes, and use them in accordance with the purposes agreed upon with the information subject. If they exceed the agreed purposes, they shall obtain separate consent. Information subjects can inquire about their own credit information from credit reporting agencies. If the credit reporting agencies have not collected the information subject’s information, they should clearly inform them that if they have collected the information subject’s information, they should provide the information subject with the collected information content.

Credit reporting agencies in China shall provide personal information subjects with free credit report inquiry services twice a year through various methods such as the Internet, business premises, and entrusting other institutions. If a credit reporting agency entrusts other agencies to provide free credit report query services to information subjects, it shall review the qualifications, service capabilities, safety protection facilities, and compliance requirements of the entrusted agency, and be responsible for the entrusted agency’s inquiries and leaks by joint and several liability.

The subject of personal information in China has the right to request a complete credit report from the credit bureau. The content of credit reports provided by credit reporting agencies to individuals shall not be less than the content of credit reports provided to information users. Credit reporting agencies in China shall not charge information subjects for the reason of deleting bad information or not collecting bad information.

Where credit reporting agencies provide credit information inquiry products and services such as credit reports, they shall objectively display the content of the inquired credit information, and explain the content of the inquired credit information and professional terms. If a credit reporting agency provides a credit report product, the content of the report shall include the information user’s inquiry records, objection marks, and information subject statement. Credit reporting agencies that provide evaluation products and services such as portraits, scoring, rating, etc., shall establish evaluation standards, and must not use elements that are not related to the credit of the information subject as evaluation standards. Where a credit reporting agency provides personal credit evaluation services, all data used for evaluation shall be displayed in the credit report provided to the information subject. Credit reporting agencies shall disclose the scoring methods and models used in personal credit evaluation products, and the degree of disclosure shall be limited to reflecting the credibility of the evaluation.

If credit reporting agencies provide corporate entities or debt credit rating services, they shall comply with relevant management regulations on credit rating businesses. Where credit reporting agencies provide anti-fraud products and services, they shall establish standards for identifying fraudulent credit information.

Credit reporting agencies providing credit information inquiry, credit evaluation, and anti-fraud services shall report the following matters to the People’s Bank of China or its branches above the provincial capital (capital) city center branch (hereinafter collectively referred to as the branch):

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Credit reporting agencies shall not provide the following credit reporting services and products:

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Credit reporting agencies shall formulate safety management systems involving all business activities and equipment and facilities, and adopt effective protective measures to ensure the security of credit information.

Individual credit reporting agencies and corporate credit reporting agencies that store or process the credit information of enterprises of more than 500,000 enterprises shall meet the following requirements:

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Credit reporting agencies shall ensure the safety of the operating facilities and equipment of the credit reporting system, security control facilities and APPs and other mobile internet terminals, do a good job in daily operation and maintenance management of the credit reporting system, and ensure the physical security of the system, network security, and host security, application security, data security and client security, prevent data loss and destruction, and prevent illegal intrusion into the credit investigation system.

The credit reporting agency shall do a good job in personnel safety management in terms of personnel recruitment, personnel leaving, personnel assessment, safety awareness education and training, and external personnel visit management. Credit reporting agencies shall strictly limit the authority and scope of staff who inquire about and obtain credit information, and they shall establish operating records for staff inquiring and obtaining credit information, and clearly record the time, method, content and purpose of staff inquiring and obtaining credit information.

Credit reporting agencies shall establish an emergency response system. When major credit information leaks occur or are likely to occur, they shall immediately take necessary measures to reduce the harm and report to the People’s Bank of China and its local branches.

For credit reporting agencies to carry out credit reporting services and related activities in China, the production database and backup database shall be located in China. Credit reporting agencies that provide personal credit information abroad shall comply with the provisions of national laws and regulations. Credit reporting agencies providing corporate credit information inquiry services overseas should review the identity and purpose of information users, ensure that credit information is used for reasonable purposes such as cross-border trade and financing, and provide it in a single inquiry. Credit reporting agencies shall not transmit the credit information of batch enterprises in a certain region or industry to the same information user overseas. Credit reporting agencies that provide corporate credit information overseas should file with the People’s Bank of China. If a credit investigation agency cooperates with an overseas credit investigation agency, it shall file with the People’s Bank of China after the cooperation agreement is signed.

Credit reporting agencies shall disclose the following matters to the public and accept social supervision:

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black camera

A Case of Rating Repair for a Small Publicly Traded Company

Agencies, Analysts, Bureaus, Raters, Read

A small publicly listed company is a company whose shares are bought and sold on a particular stock market even though turnover or total assets are small in comparison to other listed companies. Every big story starts small. Therefore, among small companies there are often also stock corporations with exceptionally high potential for a good share price development. Small businesses can also be great debtors. Well-managed companies can have excellent credit ratings over long periods. Therefore, such companies are attractive to bond investments, provided they have issued bonds.

The internet is full of investment offers. The disadvantage of this information, however, is that it is often written with the interest of selling securities. Many stock market letters testify to how spectacular sounding promise of returns can be advertised to investors. Alternative ways of obtaining reputable information about good companies are therefore of interest.

The following is an example of how an interesting company can be found and analyzed using the database of a credit reporting agency. Thousands of companies worldwide use Creditsafe to grow their business and reduce exposure to customer credit risk. With Creditsafe it is easy to determine the maximum amount of credit to extend to a company based on company information including, payment history, County Court judgments (CCJs), financial stability, credit scores and limits. Credit managers enjoy to be able to access credit reports for companies anywhere in the world.

A database like that of Creditsafe can be used not only in customer and delivery relationships, but also in all other relationships with company stakeholders. The following example shows, on the one hand, which information can give reason to deal with a company in more detail. On the other hand, the example also shows what can be misunderstood and therefore give rise to a rating repair.

Creditsafe allows to search a database of more than 240 million company credit risk profiles to determine the risk when trading with overseas companies. This information is valuable in identifying good quality companies. In particular, companies can also be found that are particularly attractive for their business partners because they have a good credit rating.

For companies in certain industries, a good credit rating is of crucial importance for business success. For example, in most countries around the world, governments apply very strict standards to the companies with which they work. The creditworthiness is checked for each invitation for tenders. The seriousness and creditworthiness of a company that supports governments in the area of security is particularly important.

The following company is a typical example. The listed company (A6T) artec technologies AG from Diepholz / Germany was founded in 2000 by Thomas Hoffmann and Ingo Hoffmann and develops and produces innovative software and system solutions for the transmission, recording and analysis of video, audio and metadata in networks and the Internet. Since 2000, customers have been using the product platforms MULTIEYE® for video surveillance and security, especially in industrial and governmental environments, and XENTAURIX® for media & broadcast applications for monitoring, streaming, recording and analysis of TV, radio and web livestream content. artec offers its customers a complete service (project planning, commissioning, service & support) both for the standard products and the special developments.

The Creditsafe Rating Model is a predictive analysis tool that uses the latest advanced statistical techniques. It combines commercial and other key information, including trade payment information, public information, key financial ratios, industry sector analysis and other performance indicators which provides you with view of a company.

The business credit score measures the likelihood that a business will remain solvent for the next 12 months. But as the executives behind millions of transactions each year are relying on business credit scores to help them answer questions like: Which vendor should we work with? Can we continue to work with this supplier? What kind of terms can we offer them? and How much funding should can we offer them? Business credits scores are much more than that simple definition.

The Creditsafe Rating Model was created by an analytics team who looked at companies that failed over the last 12 months and assessed the commonalities within these failures. They compiled hundreds of variables and looked at the weighting each variable carried along with the impact each variable had on the failed businesses. They then selected a number of variables which were compiled together to create the modules.

The company stands out at Creditsafe with an excellent credit rating. artec technologies AG (DE01958811) is reported with a very good Credit Index of 1.1, a Risk Score of 97 (on a scale from 0 to 100), the best International Score A and an extremely low Probability of Default of 0.06%.

Initially, the good credit rating seems to be confirmed in the balance sheet data. Compared to most other stock corporations in Germany, the company has a high level of equity both in absolute and relative terms. The solid lines in the graph show the comparative values for the 25% and 75% quartiles as well as the medians. Equity is the capital that remains at a company’s disposal after debts are deducted from the total assets.

It is a comparison of the company based on the industry code (primary) with other companies from the same industry. The analysis has been based on the industry code 82 – Office administrative, office support and other business support activities. The Equity Ratio measures the ratio between equity and the total assets of a company.

The Total Borrowing Ratio measures the ratio between debts and total assets of a company. The Debt Ratio measures the ratio between debts and equity of a company. Other key performance indicators measure liquidity, e.g. the Cash Ratio shows the ratio between liquid assets and short-term debts.

The performance indicators determined by Creditsafe include “Capital Structure” and “Liquidity” as well as “Results & Profitability”.

At this point the information must be confusing. No results are reported. This affects the following key figures in the Creditsafe model:

  • Revenue indicates the value of goods and services a company sold within it’s ordinary business activity during a trading period.
  • Pre Tax Profit Is calculated from the operational result plus financial result plus extraordinary result or from the net income plus the net tax expenditure.
  • Net Profit Ratio measures the ratio between operational result and revenue. So it indicates how much the company actually earned with its achieved revenues.
  • Return on Assets indicates the rate of return for a company’s total assets.
  • Return On Capital Employed shows the rate of return for a company’s capital. In distinction from the Return On Assets Ratio , this indicator considers just the long-term capital.

No values are shown for any of these key figures for the company under consideration here, artec technologies AG. Therefore one has to ask about the reasons why there are no values here.

The report of the Deutsche Bundesbank, the central bank in Germany, is also linked on the homepage of artec technologies. Like Creditsafe, this report confirms that the company has a good credit rating.

As part of Eurosystem monetary policy operations, commercial banks can submit credit claims as collateral for refinancing at the Deutsche Bundesbank. For this, the borrowing enterprises must be considered “eligible”. This is checked in a credit assessment conducted by the Bundesbank. Enterprises may also request a credit assessment. In either case, the Bundesbank provides the enterprise with the results of the credit assessment in their entirety. The aim of Bundesbank’s credit assessment system is to estimate an enterprise’s one-year probability of default (PD) on the basis of financial statements as precisely and reliably as possible. For that purpose, Bundesbank uses a statistical methods to select the ratios which, when combined, are best able to predict an enterprise’s PD.

Credit rating grades of the Deutsche Bundesbank and external credit rating agencies authorised in the Eurosystem are related. This is the example of S&P’s credit ratings:

The data input to Creditsafe can easily be checked under the “Documents” tab. This shows that, as expected, Creditsafe used data from the Federal Gazette. German companies are obliged to publish their financial statements in the Federal Gazette. In the case of the artec technologies AG considered here, however, no data on the income statement was published in the Federal Gazette.

The website of artec technologies also offers the reports of three research companies, which offer in-depth analyzes with all other aspects of stock valuation.

The missing income statement in the credit bureau’s report is due to the legal situation for small, medium and large companies. The size classes (Größenklassen) defined in the HGB serve to regulate accounting and publication for incorporated companies (Kapitalgesellschaft). The larger a capital company is, the stricter the requirements for auditing and the more detail required when disclosing the business data. The four size classes are defined in the HGB for accounting law. They are used for corporations, including the GmbH, the UG and the AG. The size classes are also applied to partnerships without a natural person as a personally liable shareholder (GmbH & Co. KG, UG & Co. KG).

In § 267 HGB, four size classes are defined: micro-company, small company, medium-sized company and large company. For each size class, at least two of the three thresholds listed for each class should not be exceeded. The thresholds are as follows:

  • Balance sheet total (Bilanzsumme),
  • Average number of employees,
  • Revenues (twelve months before the balance sheet date).

The thresholds were changed in 2016 with the German Accounting Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetz – BilRUG). The size classes are structured as follows:

Determining FactorMicroSmallMediumLarge
Balance sheet total (Bilanzsumme)350,000 EUR6,000,000 EUR20,000,000 EUR> 20,000,000 EUR
Revenues (12 months before the balance sheet date)700,000 EUR12,000,000 EUR40,000,000 EUR> 40,000,000 EUR
Number of employees on an annual average1050250> 250
artec technologies

Small companies must disclose their balance sheet and their notes. The profit and loss account is not mandatory. In addition, the audition requirement is dropped. In the case of artec technologies AG, the information published is part of the company’s follow-up obligations due to its membership of a transparency standard at the Frankfurt Stock Exchange. The obligations result from these obligations, but not from Section 267 of the German Commercial Code.

The shares of artec technologies AG are traded on the Open Market. The Open Market (Freiverkehr) is a regulated exchange market and not an organised market in the meaning of the German Securities Trading Act (section 2 para. 5 WpHG). Unlike the Regulated Market, which is subject to public law, the Open Market is subject to private law. The General Terms and Conditions of Deutsche Börse AG for the Regulated Open Market (Freiverkehr) on Frankfurter Wertpapierbörse (FWB®) regulate the conditions for admission to and the follow-up duties for securities in the Open Market segment. Admission to the Open Market is possible for securities that are neither admitted to trading on the Regulated Market nor included in trading on the Regulated Market.

Issuers and participants in the Open Market are subject to lower transparency requirements than in the Regulated Market. The Open Market segment is therefore an attractive alternative for both young, growth-oriented small and medium-sized companies such as artec technologies AG.

Since all of this information is public, it is advisable to update the information with the credit reporting agencies. Since these credit bureaus have to enter and update very large amounts of data from many companies in their databases, they rely on the official publications of the companies in the Federal Gazette. If the annual financial statements are reported to the Federal Gazette without a profit and loss account, then by default the data from the income statement are not transferred to the credit reporting agency’s database.

Important key figures about the stock corporation can be viewed free of charge on the website of the Frankfurt Stock Exchange. There are also research reports from SMC, EDISON and GBC. Not to be forgotten are the numerous other information tools, such as price information for technical chart analysis and risk indicators such as those from Moody’s, all of which provide information about artec technologies AG and offer investors certainty in their decisions.

Generally accepted, Bayesian statistics is a theory in the field of statistics based on the Bayesian interpretation of probability where probability expresses a degree of belief in an event. For rating systems, this theory says that if information is missing, a judgment should be made more cautiously than if the required information is available. If only the balance sheet and not the profit and loss account are taken into account in a rating, the result may be a poorer assessment. It is therefore advisable to add missing information.

Statistical credit rating models specify a set of statistical assumptions and processes that represent how the sample data is generated. Statistical credit rating models have a number of parameters that can be modified. For example, the event of a default can be represented as samples from a Bernoulli distribution, which models two possible outcomes. The Bernoulli distribution has a single parameter equal to the probability of one outcome, which in most cases is the probability of filing for insolvency. Devising a good model for the data is central in Bayesian inference. In Bayesian inference, probabilities can be assigned to model parameters. Parameters can be represented as random variables. Bayesian inference uses Bayes’ theorem to update probabilities after more evidence is obtained or known.

In our practical case, these theoretical considerations mean that the lack of information can lead to disadvantages in the evaluation. It is more likely that the missing information will result in a worse rating than with full disclosure. In most cases, a better rating is achieved when more information is disclosed.

In the case of a rating agency recognized under the EU regulation on credit rating agencies that carries out a committee-based rating process, however, the lack of information in the case of unsolicited ratings must not be used as a means of pressure on issuers to urge them to commission a rating process. With a credit reporting agency like Creditsafe, however, this case does not matter. The rating is determined purely mathematically-statistically and based on models without involving a rating committee made up of analysts who could make arbitrary decisions. In addition, there is no fee for the rating that could create a conflict of interest. It therefore remains a sensible way to enable a better evaluation by providing more up-to-date information.

In most cases the credit reporting agency provides the assessed company with its own company report free of charge. An application to receive your own report is sufficient with Creditsafe.. The authorization to receive information must be proven by the company’s employee. However, the company is free to refer business partners and investors to the report of the credit reporting agency and the credit rating contained therein. Similar to the reference to the central bank eligibility certified by the Deutsche Bundesbank, such a reference can strengthen confidence in the company being assessed.

The irritation about missing P&L data in the reports of the credit reporting agency about artec technologies can be easily resolved. For this it is not necessary to expand the disclosure to the Federal Gazette. It is sufficient to provide the credit reporting agency with the certified accounts. A form is available for this that simplifies and standardizes the transfer of data. All financial reports can be found on the company’s German website:

However, it can also be advisable to expand the disclosure to the Federal Gazette. Not only Creditsafe, as in the example, but also many other credit reporting agencies, research houses and, last but not least, financial service providers such as banks and insurance companies access the Federal Gazette. In order to fulfill their various obligations, to check the identity of their business partners and to determine the beneficial owner, they need official data.

PALTURAI is the example of a service that is also used by investors and creditors such as banks and insurance companies to examine the situation at a company. For this purpose, PALTURAI analyzes all reports to registration courts as well as to the Federal Gazette. In order to avoid contradicting information and irritations to the detriment of the rated companies, a consistent approach is recommended. The international data flows and interdependencies in the transfer of information worldwide are more complex today than ever before. The task in the context of a rating repair is to bring about the correction in the most efficient way possible.

With a very good rating like the one for artec technologies, the question arises whether the already very good rating could possibly even be called into question through more transparency. The income statement contains additional information that is taken into account when assessing creditworthiness. For artec technologies, the data that cannot be found in the Federal Gazette has now been added. It shows that the creditworthiness is still rated as very good. The company retains its very good ratings.

More than 300 Raters Worldwide

Agencies, Bureaus, Raters, Read

There is a simple definition of the word “rater”: “one that rates”. A rater is specifically a person who estimates or determines a rating. Not every rater is a rating agency. In a number of countries, only legal persons can be recognized as rating agencies. In most countries, individuals are free to express their opinion publicly. In the case of credit ratings, however, companies in the European Union, for example, are prohibited from expressing opinions about the creditworthiness of other companies. In order for a rating agency to express an opinion freely, official approval is required.

Ratings appear in many contexts. On RATING.REPAIR, only those ratings are of interest that are important for investment and financing decisions. The “raters” category on RATING.REPAIR meets the need to find out more about names that may be classified as rating agencies. To date we have included the names of rating agencies from the following countries:

  1. Australia
  2. Austria
  3. Bahrain
  4. Bangladesh
  5. Brazil
  6. Bulgaria
  7. Canada
  8. Chile
  9. China
  10. Colombia
  11. Costa Rica
  12. Cyprus
  13. Ecuador
  14. El Salvador
  15. Estonia
  16. Finland
  17. France
  18. Germany
  19. Greece
  20. Hongkong/China
  21. Hungary
  22. India
  23. Indonesia
  24. Ireland
  25. Italy
  26. Japan
  27. Kazakhstan
  28. Kuwait
  29. Kyrgyzstan
  30. Latvia
  31. Liechtenstein
  32. Malaysia
  33. Mexico
  34. Montenegro
  35. Myanmar
  36. Nepal
  37. Netherlands
  38. New Zealand
  39. Nigeria
  40. Norway
  41. Pakistan
  42. Peru
  43. Philippines
  44. Poland
  45. Portugal
  46. Romania
  47. Russia
  48. Serbia
  49. Singapore
  50. Slovakia
  51. Slovenia
  52. South Africa
  53. South Korea
  54. Spain
  55. Sri Lanka
  56. Sweden
  57. Switzerland
  58. Taiwan/China
  59. Thailand
  60. Trinidad and Tobago
  61. Turkey
  62. Ukraine
  63. United Kingdom
  64. Uruguay
  65. USA
  66. Uzbekistan
  67. Vietnam
  68. Zambia

We have been collecting information about rating agencies since the 1980s – even at a time when the internet didn’t exist yet. At that time, information was only available from newspapers and magazines, books, archives, through visits, by post or by telephone. RATING EVIDENCE GmbH uses this unique documentation and answers questions about all known active and inactive agencies and even companies that provide information about creditworthiness, deliver credit reports or could be confused with Recognized Credit Rating Agencies. Some rating agencies have a large number of subsidiaries. In these cases only the most important companies are listed here.

More than 500 raters on our list

The following list contains the names of more than 500 rating companies regardless of whether they are still active, have changed their names or are even irrelevant or not recommendable for some investment and financing decisions. Our rough estimate is that around 300 of these 500 companies are active. The other 200 names refer to rating agencies that have since been taken over, renamed or ceased operations.

This list must not be confused with our favorites or a recommendation list. Rather, it is advisable to contact us to let us know what you want to read about. Depending on demand, you will read more on RATING.REPAIR about any of the names mentioned here.

Names of Chinese rating agencies, unless they have an official English name, appear here in Pinyin. If you have switched on the translation into your language with Google Translate, it is advisable to switch off the translation function when searching for the official name, otherwise the name may also be translated.

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Rating Repair of a German Hotel Consulting Company’s Credit Report

Bureaus, Read, Repairs, Reports

How does rating repair work in practice? The following is an example. A full rating repair needs even more than shown here, but this real example of a real company gives a first impression of what it’s all about. Rating repair differs considerably between different size classes of companies, type of organization, legal form, industry, etc. The following is an example of a consulting company that specializes in advising hotels.

The company uses the opportunities to work together in teams of freelancers and employees of the customers. Computers, data and software are the company’s most important assets that can be accounted for. The legal form of a GmbH is used to limit liability from business activities. It is therefore in the case of this consultancy not a function of this legal form to accumulate capital. Despite successful business activity, the balance sheet total is therefore low.

The example looks at the credit report from an international credit reporting agency for a German company. The report cannot be compared to an analysis by a Recognized Credit Rating Agency. However, information like the one shown here helps many suppliers, customers and other business partners as well as authorities before they decide on a business relationship. Wrong information can therefore have fatal consequences.

Every decision maker takes their first look at the summary. The company shown here is doing very well. This is evident from the excellent Credit Index, Risk Score, International Score and Probability of Default. This good assessment does not rule out that the report is incorrect. In particular, minor errors can be found which, although they do not significantly change the overall assessment, nevertheless create a false image of the company. Therefore, all details must also be checked. Examples of this are shown below. The consequence of the analysis can be to contact the credit reporting agency and ask for a correction of the data.

Key Financials and Payment Details Summary

“Days Beyong Terms” (DBT) are the average days beyond terms weighted by the age and amount of invoices. The calculation uses all trade lines received from suppliers of the Trade Payment Programme. The credit reporting agency points at the fact, that this is not a statistic based on representative and complete data. Available trade lines might contain occasional instances which are not representative. It is possible that companies with a high Days Beyond Terms pay within terms on other occasions.In the case of this consulting firm, the sales from suppliers are insignificant. Accordingly, no peculiarities in payment behavior are reported.

Auditor Detials, Business Purpose and Additional Industry Codes

The company shown here has been around for more than a decade. Over the years, the purpose of the company may have changed or the focus of its business activities may have shifted. If so, the consequences for the assessment should be examined. For example, it makes a big difference whether a company offers hotel advice or operates a hotel itself. Hotels have to expect massive losses due to the corona crisis. The industry will have to be assessed accordingly critically.The consultant here in the example is not directly affected by this development, so it remains to be seen whether he might even benefit from the need for restructuring in the hotel industry.

Score Summary

The Score Summary shows the Credit Worthiness “very low risk profile” and an Assessment: “The default risk is reckoned to be very low. The business connection can be approved.” With such a good credit rating, the only question for the assessed company is how the good credit assessment can be secured for the future.

Credit Limit and Contract Limit

The recommended credit limit is calculated using a formula that analyses information from a company’s financial accounts and payment record. The registered company credit limit is the credit reporting agency’s recommendation of the total amount of credit that should be outstanding at any one time. A Contract Limit is the suggested value of a contract that a company can handle. It is an assessment of the subject company and its suitability to carry out a specific contract. It is mainly based on value of the sales that a company can generate. The values shown here are very low, as if the consulting company could only place orders up to € 1k without collateral. Ratingrepair can help to raise the limit here. Various instruments are available for this, which require further advice in order to implement them.

Directors / Shareholders Summary and Current Directors

Credit bureaus get their information from public registers. When the consulting company was founded, three managing directors were appointed. Of these, however, two left the management after just a few years. In the meantime, the management is carried out solely by the majority shareholder. There is a need for correction here. Anyone who continues to research these people would potentially draw misleading conclusions from the information obtained.


As can be seen here, the shareholders were correctly recorded by the credit reporting agency when the company was founded. In the present case, the changes in the shareholder structure were not taken into account.In the meantime, the shareholders had changed. Two shareholders sold their shares. A new partner joined. However, this is not reported here. Since there are no longer any relationships with the old shareholders, this information should be corrected.

Beneficial Ownership

For certain businesses and industries the Anti-Money-Laundering law (Geldwäschegesetz – GwG) requires to check if the trade partner has a beneficial owner. This identification of the beneficial owner shall prevent straw man transactions and identify the natural person in whom the economic interest is being made. At legal persons or companies a beneficial owner is every person who holds more than 25% of the voting rights, more than 25% of the capital share or more than 25% of the assets. Violations against the GwG can be fined up to 100,000 Euro per violation.

There is also a wrong statement here. Incorrect information about a beneficial owner can be severely punished, depending on the circumstances. In our example, the beneficial owner is now the German managing director / majority shareholder and no longer Swiss, as can be seen here.

Assets and Liabilities

The balance sheet shown by the credit bureau shows typical characteristics of a small company: The balance sheet items fluctuate greatly in their amount, since even absolutely small amounts lead to relatively large changes.

Debt Ratio

Find above a comparison of the company based on the industry code (primary) with other companies from the same industry. The analysis of the credit reporting agency has been based on the industry code 70 – Activities of head offices; management consultancy activities. The Debt Ratio measures the ratio between debts and equity of a company. Here, too, the strong fluctuations typical of small companies can be seen, which cannot be compared with those of large companies.

Cash Ratio

The Cash Ratio shows the ratio between liquid assets and short-term debts. The consulting company only delivered the legally required minimum balance sheet to the German Federal Gazette. This does not require a breakdown of the current assets. The liquid assets can therefore not be determined from the publicly available data.These items are accordingly noted in the credit report with dashes. Depending on the situation, it may be advisable to voluntarily break down these items in the annual financial statements submitted to the German Federal Gazette.


The revenues indicate the value of goods and services a company sold within it’s ordinary business activity during a trading period. An income statement does not necessarily have to be submitted to the Federal Gazette if certain threshold values for company size are not exceeded. Accordingly, only dashes are used here instead of concrete numbers. Small corporations are those that do not exceed at least two of the three following criteria (1) 6,000,000 € balance sheet total; (2) 12,000,000 € in sales in the twelve months prior to the closing date; (3) an annual average of fifty employees. Micro corporations are small corporations that do not exceed at least two of the three following criteria: (1) 350,000 € balance sheet total; (2) 700,000 € in sales in the twelve months prior to the reporting date; (3) an annual average of ten employees. The disclosure requirements are graded accordingly.

Net Profit Ratio

Net Profit Ratio measures the ratio between operational result and revenue. So it indicates how much the company actually earned with its achieved revenues. For the same reasons of the limited disclosure, the information on the net profit ratio is also not meaningful.In the present example, the credit reporting agency has not made any estimate of these values.

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In summary, there is a need for rating repair here. Errors on the credit report can lower the credit score. Unfortunately, the same is true for correct information. If facts are rather unfavorable that could be published voluntarily in the Federal Gazette or to the credit bureau, this can lead to a worse Credit Index, Risk Score and International Score and an estimate of a higher Probability of Default.

For certain businesses and industries the required check according to the Anti-Money-Laundering law (Geldwäschegesetz – GwG) could not be assisted by the data provided in the credit report. The reported trade partner is not the beneficial owner, since partners had changed.

First Quality Check On A Credit Reporting Agency: Creditsafe

Agencies, Bureaus, Read, Repairs, Uses

This article is about the credit reporting agency Creditsafe, the performance of the company and a concrete example of what a credit report from Creditsafe looks like in practice. Details of the offer are examined and discussed in detail. We carry out a fact check based on the official data from the Federal Gazette of the Federal Republic of Germany.

With more than 1,200 employees, including 120 in Germany, Creditsafe provides business information and financials to over 115,000 customers with over 365 million company data from 160 countries and from more than 8,000 sources. This is roughly an average of more than 300,000 company data per employee, who supports over 500,000 users for 450,000 decisions every day with the data provided by Creditsafe. Company data is updated five million times a day from local sources. This provides insight into the thousands of business events that occur every day. About 60% of reports available online contain payment details from suppliers.

The presentation of Creditsafe is followed by a concrete example. This is a demanding case because it looks so simple and easy to understand at first glance. The example company looks simple, because it is a music house. The business model is very simple. Buying musical instruments from suppliers, selling to customers. But the music house is a wholly owned subsidiary of a parent company. The parent company was founded six years earlier because it focuses on online sales and the entrepreneur previously worked as a sole trader with his family business. The subsidiary does not make use of the permitted exemptions from separate accounting. This raises the question of whether Creditsafe still achieves an appropriate credit rating. In the following, you will first read general information about Creditsafe and the activities of this credit agency.

Creditsafe is fortunate to have an extensive and ever growing database of up-to-date company information. As the database expands and increases the wealth of data Creditsafe holds, they must evaluate whether this data contains information that is indicative of company stability or future insolvency. Creditsafe must also re-validate whether previous indicators of future insolvency or stability remain true. In both cases, it is likely that adjustments to the scorecard will be needed to improve predictability.

creditsafe logo

To differentiate linguistically, Creditsafe calls its customers sometimes “partners” because customers are companies that in turn obtain information about other companies. Creditsafe partners can add companies from Belgium, Germany, Denmark, Finland, France, Great Britain, Ireland, Italy, Japan, Canada, Liechtenstein, Luxembourg, Netherlands, Norway, Austria, Sweden, Switzerland, Spain and USA to a list for which is monitored via email.

Because not all countries use a value from 1 to 100, Creditsafe is using a rating scale from A to E. This rating scale should make it easier to compare the credit risk of companies across national borders. A is the lowest risk, D is the highest, and E means that no assessment has been made.

Creditsafe accesses data on more than 49,000 active listed companies in over 165 countries around the world, as well as hard-to-find historical data on all non-trading companies involved in asset and real estate management:

  • Name, address and contact details of the company (fully verified),
  • Description of the main business activity,
  • Complete data on shareholders and owners,
  • Credit rating and maximum credit limit,
  • Geographical breakdown of sales and turnover,
  • Information about important competitors,
  • Annual and interim reports,
  • Sales, profit and loss accounts,
  • Balance sheets and cash flow,
  • Key balance sheet indicators,
  • Current and former directors,
  • Information about holding companies and subsidiaries,
  • Corporate ties.

The massive use of electronic data processing not only enables this high productivity unimaginable just a few decades ago, but also enables users to check their customers’ credit and financial data in real time. Unlike other credit bureaus, Creditsafe does not save historical reports, but checks all companies about which no information is available immediately. Whenever a report is not immediately available online for review, the company in question is re-examined to collect current, trustworthy information. Creditsafe wants to be able to serve research orders within five and a half days.

Integrating Creditsafe data with a customer relationship management system should be child’s play thanks to preconfigured apps for Salesforce, Sage, SugarCRM, SAP, Microsoft Dynamics, etc. Creditsafe apps should make manual entry and updating of customer data unnecessary and thus save time and resources. An option for the immediate creation and updating of data records is intended to correct and rely on the data.

The application programming interface makes the following systems available for Creditsafe:

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Telephone searches, stock indices, local agents, branches, official gazettes, payment histories, news, banks, directories, courts and registration authorities are among the sources of information (for researching registration addresses, see Civil Address).

Creditsafe also provides mass and individualized data in a file tailored to the ideas of the respective partner. With hundreds of selectable fields that support all aspects of the business, the content is designed to meet the specific requirements. Such files can be securely provided in a format of your choice, daily, weekly, monthly or quarterly.

Via a programming interface, Creditsafe enables integration into customer-specific Customer Relationship Management (CRM) systems and thus the consistent alignment of a company with its customers and the systematic design of customer relationship processes. The programming interface – Application Programming Interface, API for short – is the part of the program that is made available by a software system to other programs for connection to the system.

With Connect API, data should be integrated into the systems mentioned and users should have the opportunity to use Creditsafe business data in any required way. Direct real-time access to company data is intended to enable employees to make quick and informed decisions with data that the company can trust and that allow the development of new functions and automated processes.

If Creditsafe is connected to one of the systems mentioned, the following tasks should be possible:

  • Checking the creditworthiness of suppliers and customers,
  • Representation of corporate ties,
  • Representation of beneficial owners,
  • Credit ratings for companies worldwide,
  • Continuous monitoring,
  • Financial indicators,
  • Current and historical balance sheet numbers,
  • Check for debtor register entries / bankruptcies.

Creditsafe supports customer and credit decisions in companies with creditworthiness information about private individuals, whose data comes from publicly accessible sources. This data is continuously supplemented by data from national and international partners and by manual research. Negative features include recorded in bankruptcy and debtor registers. Overview of all companies in which a natural person is a manager or in which they hold shares (see also Palturai).

The Creditsafe Data Cleaning Tool is a solution to improve data quality and is available in a total of 14 countries to correct duplicates, errors and outdated information, to identify inactive companies and data with a lot of information (such as company master data, balance sheet data, credit ratings, credit limits and contact information) ) enrich.

The Creditsafe Compliance Check supports the identification of potentially high-risk business relationships and their continuous monitoring (monitoring), for example in the case of current and previous sanctions against companies and private individuals, for the identification of Politically Exposed Persons (PEPs) and in the search for court judgments, negative reporting and bankruptcies .

What does a company search on the platform of “” deliver? In the following you will see what creditsafe has to offer, what information to expect and how key performance indicators are calculated. Screenshots as of August 2020 guide you through the Creditsafe cockpit. Click on the screenshots in the text below to overlay images on the current page and see more details.

As the example of the music store shows, a professional assessment of creditworthiness cannot be replaced by looking at a few key figures. In the presentation of Creditsafe, the credit index and risk score reflect the good creditworthiness of the music store, which is based among other factors on high profitability, but not on a high equity ratio. Equity is created in the parent company, the results of the wholly-owned subsidiary are always transferred to the parent company, and any losses would be offset by the parent company. It is only through an overall view of all the relevant assessment criteria that Creditsafe can come to a plausible credit rating of the company’s creditworthiness.

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Solvency Index

Bureaus, Definitions, Read

A solvency index is the central pillar of a commercial report and other information formats for evaluating a business’s solvency. Its accurate forecasts of the probability of default (PD) provide for quick and direct assessment of a customer’s solvency – and consequently also the customer’s credit worthiness.

The solvency index calculation techniques vary and are continually evolving, employing proven mathematical and statistical analysis methods. These advances not only take structural changes in the economic structure, but also factors such as changing PDs in the individual market segments, into account.

The solvency index’s forecasting accuracy is also attributed to an extensive database. At a leading German credit bureau, it has increased significantly over the past few years – not only in terms of 10 million accounts now published, but also regarding industry key performance indicators and in the payment-experience field. The debtors’ register of this credit bureau alone, for example, gives access to over 100 million payment experiences in Germany.